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Open banking is a revolutionary new financial concept available in many countries, including the UK and Australia. Although it is not yet fully functional in Canada or in the USA, open banking has the potential to change the way Canadians manage their finances completely. In this article, we’ll cover everything you need to know about open banking in Canada and the positive impact this could have on you, your business, and your industry in general.
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What Is Open Banking and How Does it Work?
Often referred to as consumer-led banking, open banking is an international term used to describe a method of banking that offers a secure way for individuals and businesses to share financial information with financial technology companies (also known as fintechs). Simply put, open banking works in just a few simple steps:
- The user chooses a fintech app that suits their needs to manage finances.
- The user is prompted by the app to link their personal bank account(s).
- The user gives permission to the bank(s) to share their personal financial information with the fintech app.
- Financial information is securely shared using an online channel.
- The fintech app uses analytics and data gathering software to suggest services and products to the user.
Open Banking in Canada
Open banking is not fully available in Canada (but it will be soon), so there are currently limited ways for users to connect or share information with fintech companies. In August 2021, a report was issued by the Canadian Department of Finance Advisory Committee on Open Banking in the hopes of moving forward towards an open banking system in Canada. Open Banking Initiative Canada (OBIC) hopes to create a market-driven open banking system in Canada to give businesses more autonomy over their finances.
What Are the Benefits of Open Banking for Canadians?
- Gives businesses more choice and control over their finances
- A more customer-centric approach from banks, with highly personalized solutions tailored to consumers’ specific needs
- Empowers fintech companies to develop new and innovative applications to service customers in multiple industries
- Means increased security measures as consumers can choose exactly who has access to their financial information, when, and for what purpose
- Gives consumers faster access to certain services, like credit offers and financing
Open banking is becoming more assertive in Canada. It has the potential to revolutionize our financial landscape and provide businesses and individuals alike with myriad opportunities for growth and success.
Organizations and enterprises can leverage Kapital’s proper end-to-end open banking solution, from data analytics with Kaptrak to digital payments by Kapcharge, to improve their offerings and achieve competitive advantages. Request your demo and get in touch with one of our team members at Kapital Solutions today to learn more about what open banking might look like in Canada and how your business can benefit from such a creative solution.
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